Two Chinese exchanges and the country’s foreign exchange trading operator will establish a 50-50 joint venture with Deutsche Boerse, and the German exchange will also establish a three-way venture with the Shanghai Stock Exchange and China Financial Futures Exchange.
Reuters/Hong Kong/Beijing
Two Chinese exchanges and the country’s foreign exchange trading operator formally agreed to establish joint ventures with Germany’s Deutsche Boerse yesterday.
The deal, signed in Beijing at a ceremony overseen by Germany’s Chancellor Angela Merkel and China’s Premier Li Keqiang, marks a boost for Frankfurt, which appears to have stolen a march on London in connecting its exchanges to China.
China’s foreign exchange operator will establish a 50-50 joint venture with Deutsche Boerse, and the German exchange will also establish a three-way venture with the Shanghai Stock Exchange and China Financial Futures Exchange (CFFEX). The new company will be called the China Europe International Exchange (CEINEX).
CEINEX is set to launch on November 18 with new China cash products including exchange-traded funds and bonds, making it the first dedicated platform for yuan-denominated trading outside mainland China, Deutsche Boerse said.
“CEINEX is a milestone in the strategic cooperation amongst our three exchanges. Its value proposition to ‘trade China in international markets’ is a major step forward in the internationalisation of the RMB,” said Deutsche Bourse chief executive officer Carsten Kengeter.
Beijing is trying to improve international perceptions of its financial openness in the run-up to a meeting of the International Monetary Fund to decide whether to include the yuan in its basket of reserve currencies, which would provide a boost to the currency’s global status.
One of the complaints of opponents of yuan inclusion is that it is too difficult for foreign investors to get their hands on yuan-denominated financial products outside China due to the country’s long-standing capital account restrictions.
The deal is a coup for Deutsche Boerse, which has a strong track-record cross-listing financial products with Asian exchanges in Korea and Taiwan, and which has ambitions to add China’s major financial futures to this list.
A source familiar with the CEINEX deal said the exchanges were already in discussions over trading existing Chinese financial futures, including the CSI300 index futures contract in Frankfurt. The CSI300 contract has been one of the most widely traded contracts globally since its launch in 2010.
Yesterday’s announcement follows an intense campaign by the British government to deepen economic ties with China. The countries have agreed to explore linking Shanghai and the London Stock Exchange, but have provided no further details.
Yesterday’s deal follows a turbulent summer in the Chinese financial markets, including a 30% market crash and a surprise devaluation of the yuan, that startled many foreign investors and which led Deutsche Boerse to delay the launch of a new Singapore-based exchange, Reuters reported last month.
